Henry Groppe has oil charts going back to the mid-1850s, more than a decade before John Rockefeller started Standard Oil, and a lifetime before the first Model-T rolled out of Henry Ford's factory. The joke is that Mr. Groppe is not so much a fan of such history as a witness to it. He is 79, landed in the oil and petrochemicals industry in 1946 and became an oil consultant in 1955, when he formed Groppe Long & Littel. That probably makes him the oldest active oil guru in the United States. The man knows a thing or two about oil production and prices and what he will tell you in his charming Texas drawl isn't pretty: The "peak oil" theory is no theory, son -- it's happening.

The theory says global oil production will soon reach peak output, if it hasn't already, followed by steady decline just as the world demands more supplies to run its economies. The theory is still highly controversial. Many, probably most, governments of oil-producing countries (including the United States) are not ready to hit the panic button. They expect production to rise for some time -- perhaps decades -- before the inevitable happens. Many economists agree. They argue that higher prices will stimulate previously uneconomical oil exploration and development while encouraging the use of other forms of energy, such as nuclear or hydrogen power. So what crisis?

Forget it, Mr. Groppe says. "We think peak oil is the case," he says. "It's happening in country after country. Our best judgment is that production will decline by a million barrels a day for each year from here on out."

The old guy is not often wrong. For instance, in 1980, when governments, economists and oil companies warned of $100 oil, Mr. Groppe predicted a $15 price by 1985, half its 1980 price. He was right. In 1998, an Economist magazine's cover story, "Drowning in Oil," suggested prices were headed to $5. Mr. Groppe called for a big jump in prices. A year later, oil was on is way to $30.

The United States should know and respect the peak-oil theory because it became a peak-oil victim a long time ago. In 1956, a Columbia University geophysics professor called M. King Hubbert said oil production in the lower 48 states would crest in the early 1970s.

Mr. Hubbert nailed it. In fact, U.S. oil production topped out in 1970 at about 10 million barrels a day, double the 1945 level. Production has since fallen by almost half, in spite of the discovery of Alaska's huge Prudhoe Bay field, and the United States is hostage to foreign oil. It imports about two-thirds of its consumption of 20 million barrels a day (world consumption is slightly more than 80 million barrels a day).

Mr. Groppe's point is that the United States is far from unique. Output in country after country is in decline in spite of $1.5-trillion (U.S.) spent on exploration and development in non-OPEC countries since the 1970s oil shocks. A 2002 oil depletion study done by Ohio State University notes that Venezuela's four biggest and oldest fields once collectively produced two million barrels a day. The figure is now 850,000. Nigeria's production peaked in 1978 (although production has held up well since the 1990s). Britain peaked in 1999. Canada, thanks to Alberta's oil sands, is the only non-OPEC country whose production probably will keep rising over the next decades.

The wild card is Saudi Arabia, home of Ghawar, by far the world's biggest oil field. There are conflicting reports about its ability to produce more than its current five million barrels a day. Mr. Hoppe says the depletion rates of some of the deep-water wells in the Gulf of Mexico, a major source of U.S. oil, are as high as 30 per cent a year.

Why is this happening? Simply put, there is a gap between what is being extracted (a lot) and what is being discovered (not a lot). Production isn't falling off a cliff -- yet -- because many of the big oil fields are still fairly productive. How long they can remain so is the big question. The truth is, more than 70 per cent of world oil comes from fields discovered before 1970. "The frenetic rush to bring new supplies by bringing smaller fields into production will not replace the decline in these aging fields and the world is faced with a permanent scarcity," the Ohio State report says.

The other truth is that exploration is a rational pursuit. Oil companies always try to find the biggest fields first. They're cheaper to develop and provide quicker returns on investment because of their high production rates. This does not mean no more monster-size fields exist; it just means that discoveries probably will get smaller and smaller even as oil companies ramp up their exploration budgets. "We produce two to three times as much each year as we find," Mr. Groppe says. He doesn't think we're running out of oil -- just cheap oil. "We ran out of $2 oil in 1973; it had been $2 a barrel for 25 years," he says. "Then we ran out of $8 oil, then $15 oil. Now we're running out of $40 oil."

This week, oil prices, which went as high as $59 a barrel earlier this year, rose about 6 per cent to more than $55. If he's right, Goldman Sachs's shocking forecast that oil could hit $105 a barrel is not so shocking after all. Not surprisingly, Mr. Groppe is bullish on oil stocks.